Question

FitPlus is a regional chain of health clubs. Each club’s manager has the authority to make in- vestments as needed and is evaluated based largely on ROI. FitPlus Club 52 reported the fol- lowing results for the past year:
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Average operating assets . . . . . . . . . . . . . . . . . . . . . . 80,000
Required:
The following questions are to be considered independently. Carry out all computations to two decimal places.
1. Compute the club’s ROI.
2. Assume that the manager of the club is able to increase sales by $80,000 and that as a result operating income increases by $6,000. Further assume that this is possible without any increase in operating assets. What would the club’s ROI be?
3. Assume that the manager of the club is able to reduce expenses by $3,200 without any change in sales or operating assets. What would the club’s ROI be?
4. Assume that the manager of the club is able to reduce operating assets by $20,000 without any change in sales or operating income. What would the club’s ROI be?


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  • CreatedJuly 08, 2015
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